Northwest Power Planning Council: Greater Public Oversight of Business
Operations Would Enhance Accountability (Letter Report, 08/30/96,
GAO/RCED-96-226).

Pursuant to a congressional request, GAO reviewed the Pacific Northwest
Electric Power and Conservation Planning Council's business practices,
focusing on whether the: (1) Council's program activities are consistent
with congressional direction; and (2) Council is exercising adequate
oversight of its business operations.

GAO found that: (1) the Council's energy planning and wildlife efforts
are consistent with the goals of the Pacific Northwest Electric Power
Planning and Conservation Act; (2) the Council has prepared four
long-range regional conservation and electric power plans to meet its
conservation and electricity needs; (3) the Council has distributed
various other publications on electricity, fish and wildlife, and
related topics for public comment; (4) it is difficult to make
long-range plans for the Northwest region's electricity market due to
significantly lower electricity costs, and increasing deregulation and
competition within the market; (5) the governors of four Northwest
states have convened a comprehensive review of the Northwest energy
system to determine how changing conditions within the electricity
industry are affecting the Council's role in fish and wildlife
conservation; (6) the Council has proposed improving the evaluation of
its fish and wildlife mitigation efforts by requiring unproven
mitigation measures to have a monitoring and evaluation component,
making more frequent and formal reviews of its conservation and electric
power plan, and tying funding for program measures to participation in
monitoring and evaluation efforts; (7) oversight of the Council's
business operations have shifted to the Council chairman and executive
director and as a result Council members receive limited information
concerning the Council's operating policies and procedures; and (8) the
Council could improve its credibility by making its policies and
decisions a matter of public record.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-96-226
     TITLE:  Northwest Power Planning Council: Greater Public Oversight 
             of Business Operations Would Enhance Accountability
      DATE:  08/30/96
   SUBJECT:  Electric utilities
             Regional planning
             Electric power generation
             Internal controls
             Energy law
             Energy conservation
             Endangered species
             Environmental policies
             Anadromous fishes
             Wildlife conservation
IDENTIFIER:  Pacific Northwest Electric Power and Conservation Planning 
             Council's Fish and Wildlife Pro
             Columbia River Basin (WA)
             Idaho
             Montana
             Oregon
             Washington
             
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Cover
================================================================ COVER


Report to Congressional Requesters

August 1996

NORTHWEST POWER PLANNING COUNCIL -
GREATER PUBLIC OVERSIGHT OF
BUSINESS OPERATIONS WOULD ENHANCE
ACCOUNTABILITY

GAO/RCED-96-226

Public Oversight of Northwest Power Council

(307342)


Abbreviations
=============================================================== ABBREV


Letter
=============================================================== LETTER


B-272741

August 30, 1996

The Honorable Helen P.  Chenoweth
The Honorable Wes Cooley
The Honorable Jennifer Dunn
The Honorable Richard Hastings
The Honorable Jack Metcalf
The Honorable Randy Tate
House of Representatives

This letter is in response to your request of January 18, 1996,
asking us to conduct a review of the Pacific Northwest Electric Power
and Conservation Planning Council (Council) and its business
practices.  The Council, a four-state body mandated by the Pacific
Northwest Electric Power Planning and Conservation Act (act),
oversees regional energy and fish and wildlife policies.  The
eight-member Council, which is appointed by the governors of Idaho,
Montana, Oregon, and Washington, has a central staff numbering about
40.  Your inquiry was prompted by the disclosure of a controversial
severance package offered to the Council's former executive director. 
As agreed with your offices, we focused our review on the following
questions: 

  -- Are the Council's program activities consistent with
     congressional direction? 

  -- Is the Council following sound business practices and exercising
     adequate oversight of business operations? 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

The Council's energy planning and fish and wildlife efforts have been
consistent with congressional direction, but changing conditions now
cloud the Council's future.  The act directed the Council to prepare
long-range plans for the region's conservation and electricity needs,
and the Council has prepared four such plans in its nearly 20-year
history--the most recent in 1996.  In connection with fish and
wildlife policy, the Council has prepared a program directing the
efforts of various federal and state agencies and Indian tribes. 
However, changing conditions in the utility industry and fish and
wildlife mitigation have implications for the Council's future.  For
example, the current transition from a regulated monopoly to a
competitive market for electricity raises questions about the
relevance of continued long-term power planning--a major Council
activity.  The governors of the four Northwest states have convened a
comprehensive review of the Northwest energy system and the Council's
role in it (a report is due in December 1996).  Likewise, changing
conditions have prompted evaluations of the role and content of the
Council's fish and wildlife program.  At the request of the Congress,
the Council prepared a report recommending ways to strengthen
regional control over efforts to conserve and enhance fish and
wildlife within the Columbia River basin. 

Internal controls administered by the central staff over day-to-day
operations (such as travel, procurement, and payroll administration)
were generally sound.  However, the Council's oversight of these
operations has not been consistent.  This condition was brought into
sharp public focus by the disclosure of a controversial severance
agreement for the Council's former executive director, together with
statements from some Council members that they were unaware of the
organization's severance policies.  Over time, much of the oversight
of the Council's business operations had been shifted to the Council
chairman and the executive director.  As a result, the Council
members themselves had limited information about some of the
organization's operating policies and procedures.  The Council
members have since taken steps to improve their oversight of business
practices, and these steps appear sufficient to correct the immediate
problems at hand.  Nonetheless, given the amount of change and
uncertainty in the Council's main areas of focus--power and fish and
wildlife--the potential exists for the Council members' attention to
be similarly shifted away from administrative matters in the future. 
We believe the Council could improve its credibility as a prudent
manager of public resources by taking steps to make its policies and
decisions on business operations more a matter of public record. 


   BACKGROUND
------------------------------------------------------------ Letter :2

The Council is a four-state body authorized by the Congress and
established as an interstate agency on April 28, 1981, by agreement
among the four Northwest states.  Its main purpose is to act as a
regional planning and policy-making agency to ensure that the
Northwest has an adequate, economical, and reliable power system,
while simultaneously rebuilding the fish and wildlife populations
damaged by the operations of federal dams on the Columbia River and
its tributaries.  The Council members, two from each of the four
states, are appointed by their respective governors and have two main
functions:  (1) representing their states in energy and fish and
wildlife matters and (2) through the executive director, directing
and overseeing the Council staff.\1 Both the act and the Council's
by-laws specify that the members are responsible for overseeing both
the Council's program activities and its business operations,
including approving major policy and personnel changes. 

As a four-state body, the Council is neither a federal nor a state
agency, and it has some flexibility in developing its own operating
policies and procedures.  The act directed the Council to follow
federal laws in its conduct of business operations "to the extent
appropriate." For example, all meetings of the Council are held in
public session, as required by federal law.  The Council's annual
budget (about $8 million) comes from electric power revenues paid to
the Bonneville Power Administration (BPA). 


--------------------
\1 In addition to the central staff, each state has its own separate
office, which is also under the direction of the state's Council
members. 


   COUNCIL'S PROGRAM ACTIVITIES
   ARE CONSISTENT WITH
   CONGRESSIONAL DIRECTION, BUT
   NEW CONDITIONS MAY RESHAPE ITS
   ROLE
------------------------------------------------------------ Letter :3

The Council's energy planning, conservation, and fish and wildlife
efforts have been consistent with the goals and direction laid out in
the act and other congressional direction.  However, changing
conditions in the utility industry and fish and wildlife mitigation
have implications for the Council's future roles and
responsibilities. 


      PAST EFFORTS ARE CLOSELY IN
      LINE WITH ACT'S REQUIREMENTS
---------------------------------------------------------- Letter :3.1

The act directed the Council to prepare a regional conservation and
electric power plan within 2 years of its establishment and at least
every 5 years thereafter.  The Council has done so, developing four
plans, the first in 1983; the most recent plan is still in draft
form.  Each plan has included a 20-year forecast of the demand for
electricity and options for meeting that demand. 

The act also directed the Council to develop a program for protecting
and enhancing the fish and wildlife affected by dams on the Columbia
River and its tributaries and to open it for review at least every 5
years.  The Council adopted its first fish and wildlife plan in
November 1982.  Since then, it has conducted four extensive revisions
of the plan (1984, 1987, 1991-93, and 1994) and has adopted numerous
issue-specific amendments.\2

All of the power and fish and wildlife plans went through an
extensive public involvement process as required under the act,
including hearings, consultations with state and federal agencies,
and other opportunities for public comment.  The Council also
produces and distributes various other publications that provide
information on electricity, fish and wildlife, and related topics. 
As a measure of the extent to which this involvement has taken place,
the Council's mailing list includes over 10,000 names. 


--------------------
\2 While the Council has met its basic statutory responsibilities to
prepare a fish and wildlife plan, a 1994 U.S.  Court of Appeals
decision (Northwest Resource Information Center v.  Northwest Power
Planning Council, 35 F.3d 1371 (9th Cir.  1994)) found that its 1992
salmon strategy was deficient in several respects.  The court
concluded that the Council had failed to explain in its plan the
statutory basis for rejecting the recommendations of fisheries
managers and did not evaluate proposed program measures against sound
biological objectives.  The court also indicated that the Council
should take more actions to protect fish and give greater deference
to the fisheries managers when they submit recommendations for
program measures. 


      NEW FORCES MAY AFFECT
      COUNCIL'S FUTURE ACTIVITIES
      AND ROLE
---------------------------------------------------------- Letter :3.2

The Northwest region's changing electricity market now makes it
difficult to develop the long-term plans that have typified the
Council's efforts to date.  In 1980, the power planning concerns
facing the Northwest were potential electricity shortages, the rising
cost of electricity, and competition for the low-cost electricity
provided by BPA.\3 The present situation is far different: 
Electricity costs are dropping, BPA is no longer the lowest-cost
provider, and the market is becoming deregulated and increasingly
competitive.  In the past, energy planning meant making decisions
about adding large, expensive generating plants that took years to
plan and build, but the market now focuses on lower-cost alternatives
(such as gas turbines) that can be quickly placed on line. 

Because of these changes in the Northwest's energy system, the
governors of the four states have convened a review that will
address, among other things, the Council's future role.  The study,
to be completed in December 1996, is to provide recommendations on
how best to manage the transition from a regulated to a competitive
electric power industry.  According to Council staff and the current
Council chairman, these changes to a less regulated, market-based
industry raise questions about the relevance of the Council's power
planning activities, and the review is intended to answer such
questions. 

Likewise, changing conditions are affecting the Council's role in
fish and wildlife planning.  The Council's fish and wildlife plan has
focused primarily on salmon recovery efforts.  However, in 1991 and
1992, the National Marine Fisheries Service listed several salmon
species under the Endangered Species Act.  Because the Endangered
Species Act imposes mandatory responsibilities on federal agencies
and other entities in the region, the focus of salmon recovery
efforts has shifted from the Council's regional program to the
federal government.  In light of this development and the fact that
the region lacks a single coordinated salmon recovery plan, the
Congress in November 1995 directed the Council to report on the most
appropriate governance structure for allowing more effective regional
control over fish and wildlife efforts. 

The resulting report, issued in May 1996, recommended changes that
could strengthen the Council's role and authority in directing
regional fish and wildlife policy.  The report recommended a
presidential executive order directing the federal river management
and fish and wildlife agencies\4 to act consistently with the
Council's fish and wildlife plan to the extent permitted by their
statutory responsibilities.  If the executive order does not enhance
cooperation among the agencies, the report recommended amending the
act to require these federal agencies to act consistently with the
Council's plan. 

The Council's report also raised concerns about the lack of
accountability over the results of fish and wildlife mitigation
efforts.  Estimated fish and wildlife mitigation costs covered by BPA
in fiscal years 1996-2001 are expected to range from $340 million to
$530 million per year.\5 Given this investment, the Council
recognized the need to improve the monitoring and evaluation of its
program to ensure that these expenditures are cost-effective.  The
Council has proposed steps to improve the evaluation of the program,
including (1) requiring that all but proven mitigation measures have
a monitoring and evaluation component, (2) making more frequent and
formal reviews of the implementation of its plan, and (3) tying
funding for program measures to participation in monitoring and
evaluation efforts. 

In addition to issuing its report to the Congress, in February 1995
the Council commissioned a nine-member panel of scientists to examine
the science underlying salmon recovery efforts in the region.  The
panel's preliminary conclusions call for the Council and the region
to try to restore the natural processes that shape rivers and provide
the suitable habitat required to rebuild the fish and wildlife
populations.  The panel's final report, to be completed in the fall
of 1996, may provide a basis for further changes in the Council's
fish and wildlife program. 


--------------------
\3 BPA is a self-financing federal agency responsible for marketing
federal power from the Columbia River and its tributaries.  It
currently provides about 40 percent of the region's electricity. 

\4 These federal river management and fish and wildlife agencies
include the U.S.  Army Corps of Engineers, the Bureau of Reclamation,
the Federal Energy Regulatory Commission, the U.S.  Fish and Wildlife
Service, and the National Marine Fisheries Service. 

\5 Program costs fall into three general categories:  project costs,
power system costs, and capital costs.  Project costs include funding
for hatcheries, habitat improvements, research, and other Council
initiatives.  Power system costs include reductions in hydropower
revenues due to increases in flows for migrating salmon and the cost
of replacement power.  Capital costs cover repayments to the U.S. 
Treasury for completed fish passage facilities at dams on the
Columbia and Snake rivers. 


   CONTROLS OVER BUSINESS
   OPERATIONS ARE SOUND, BUT
   OVERSIGHT SHOULD BE
   STRENGTHENED
------------------------------------------------------------ Letter :4

The disclosure in January 1996 of a controversial severance agreement
between the Council and the former executive director, together with
statements from some Council members that they were unaware of the
organization's severance policies, raised concerns about the
soundness of the operating and management controls over business
operations.  Overall, the controls administered by the staff over
day-to-day operations were generally sound.  In addition, the Council
receives an annual independent audit of both its financial statements
and its management controls.  However, the severance agreement showed
that the Council had not exercised adequate oversight of the
outplacement policy on which the severance agreement was based.  Over
time, much of the oversight and approval of day-to-day operations and
policy decisions had shifted to just two persons--the Council
chairman and the executive director.  This shift created a situation
in which the outplacement policy could be developed and implemented
without much Council review.  After the incident, the Council took
steps to increase its oversight of business operations.  Additional
steps involving greater public access to the Council's business
policies could help ensure ongoing confidence in the Council's
operations. 


      BASIC POLICIES AND CONTROLS
      GENERALLY SOUND
---------------------------------------------------------- Letter :4.1

Our review showed that, with the exception of the outplacement
policy, the policies and procedures covering business operations were
sound and that internal controls over business operations were
generally adequate and effective. 

The Council has developed policies covering all major business
operations, including travel, contracting, control and use of
equipment, and personnel practices.  Each year, the Council receives
an independent audit of its financial statements and internal
controls in which compliance with these policies is tested.  During
the planning for these annual audits, representatives of the outside
firm meet with the Council, Council staff, and BPA to determine
whether there are any areas of concern about the current systems and
controls and to incorporate any suggestions into the audit plan.  In
addition, the outside firm contacts state audit offices from the four
states to determine the results of any state reviews of the Council's
offices.  Our review showed that when outside auditors have
identified operational weaknesses (such as problems with inventory
records), the Council staff have corrected the weaknesses by
strengthening controls, rewriting policies, or taking other
appropriate action.  Subsequent audits have confirmed that corrective
actions have been taken. 

As part of our review, we conducted our own tests of various internal
controls.  (See app.  I for a description of our scope and
methodology.) We examined several key areas, including equipment use,
travel, and contracting.  We found that, with minor exceptions, staff
followed policies and procedures and that controls were generally
sound.  Examples include the following: 

  -- Cellular phone usage.  Under Council policy, the Council members
     and key staff have cellular telephones.  Phone-use records are
     checked for any calls that do not meet the established policy
     for Council-related calls.  The Council and staff members must
     pay for such calls through deductions from their pay. 

  -- Travel.  We examined claims for travel expenses and found that
     they are carefully reviewed by administrative staff for
     compliance with the established procedures.  If administrative
     staff determine that a traveler is not entitled to reimbursement
     (for example, for a meal that was paid for as part of a
     conference fee), they deny payment for the item.  We found
     instances in which such denials occurred. 

  -- Service contracting.  The Council receives contract help for
     services ranging from recording and preparing committee meeting
     minutes to determining the need for and feasibility of modifying
     the Northwest utility planning model.  Contractors' billing
     records are carefully reviewed by administrative staff for
     sufficient documentation.  In one case we reviewed, a
     contractor's bill was initially turned down for inadequate
     documentation and subsequently rejected again when the
     additional documentation submitted still did not meet standards. 


      INADEQUATE COUNCIL OVERSIGHT
      CONTRIBUTED TO CONTROVERSY
      OVER SEVERANCE AGREEMENT
---------------------------------------------------------- Letter :4.2

The severance agreement with the former executive director was signed
in September 1995.  When the amount of the agreement, nearly two and
one-half times the former executive director's annual salary, was
disclosed to the public, many perceived it as an excessive settlement
for a public agency.  The former executive director subsequently
agreed to reduce the agreement to a maximum of 1 year's compensation. 
The revised settlement is more in line with what the former executive
director would have received under the normal federal policy for
involuntary separations of career employees. 

The initial agreement consisted of four main components.  Two of
these components were consistent with federal practices:  (1) payment
for accrued vacation leave (14 weeks in this case) and (2) severance
pay of 30 weeks' salary based on years of service with the Council. 
The third component--a payment for releasing the Council from future
liability related to the involuntary separation--was based on neither
Council policy nor past Council practices.  However, the Council's
general counsel believed this additional payment was necessary in
order to obtain a full release from the executive director and to
protect the Council from any further liability. 

The fourth component--payment for a notice period of 14 months, based
on years of service, and for accumulated unused sick
leave--represented almost half of the settlement amount and was based
on the Council's outplacement policy for key employees (those in
senior management).  The development of this policy began in December
1994 and was approved in January 1995.  This new policy provided a
notice period that greatly expanded the amount of compensation that a
terminated employee could receive.  Furthermore, in developing the
outplacement policy, the Council departed from its normal practice of
modeling policies after other public agencies' practices.  For
example, the Council's original severance policy was modeled after
federal severance practices and used the same formula to calculate
the amount of the payment.  However, the director of finance and
administration said the outplacement policy was developed without
considering standard federal practices or other public agencies'
practices for notice periods.  While federal practices for
reductions-in-force include a 60-day notice period, the Council's
policy resulted in a notice period for the former executive director
that was seven times longer than under normal federal practice. 

The former executive director told us that he believed an
outplacement policy was needed for two primary reasons.  First, he
was concerned that "key" employees, particularly on the fish and
wildlife staff, might be asked by Council members to leave the staff
for such reasons as policy differences on program issues, and he
believed these employees deserved help in making the transition to
other employment.  Second, he said a notice period had been given to
certain other employees who had been involuntarily separated, and he
felt that practice should be incorporated into policy.  However, the
formula used in determining the length of the notice period was much
more generous than any the Council had used in the past. 

The controversial severance agreement brought to light a key weakness
in what was otherwise a reasonable set of controls:  lack of
participation by the Council members in certain key decisions about
business operations.  The Council's oversight was limited both during
the development of the outplacement policy and during the negotiation
of the severance agreement itself: 

  -- The outplacement policy was approved by the then Council
     chairman without discussing it with the Council members. 
     Although the Council's by-laws granted the chairman the
     authority to approve policies, some Council members were not
     aware of the outplacement policy's development or specific
     provisions. 

  -- Although all Council members were aware that the severance
     agreement was being negotiated, they were apparently not aware
     of the specifics of the agreement until after the chairman had
     approved the agreement.  According to the then chairman, he
     believed he had the authority and the approval of all Council
     members to sign the agreement. 

The minimal involvement of the Council members during these important
decisions occurred because over time the members focused less and
less on business operations.  Although the Council's by-laws required
major personnel actions and other policy changes to be approved by
the Council or the Council chairman, the members had traditionally
focused on power and fish and wildlife program issues and left the
oversight of most central office business activities to the chairman. 
At the same time, the duties of the executive director came to extend
beyond the daily supervision of the Council staff to include
developing and modifying policies.  According to a former Council
chairman, Council members were generally appointed by state governors
for their policy development skills, not their administrative skills. 
He added that policy issues were often a higher priority than
administrative matters for some Council members. 

Not only did the Council members normally focus on program issues,
but also the involuntary separation of the former executive director
occurred during a time when the Council members were under pressure
to revise their fish and wildlife plan, and considerable disagreement
about fish mitigation issues existed among the members.  These
disagreements made it even more compelling for the members to focus
on program issues, according to the chairman at the time. 


      CORRECTIVE ACTIONS COULD BE
      ENHANCED BY MAKING THE
      COUNCIL'S ACTIONS AND
      POLICIES MORE PUBLIC
---------------------------------------------------------- Letter :4.3

After the terms of the severance agreement were made public, the
Council members decided to renegotiate the terms of the agreement
with the former executive director.  In a statement to Northwest
ratepayers in the Council's newsletter, the members said they did not
know there was a policy in place that would lead to such a large
severance package, had not made clear that they wanted to review the
agreement before the agreement was made final, and did not exercise
the kind of oversight needed in the situation. 

In response to the widespread criticism that accompanied the
disclosure of the settlement agreement, the Council took several
steps to increase its involvement in business operations and its
oversight of policies.  More specifically, the Council

  -- changed its by-laws (in a public session) to (1) state that the
     full Council must be involved in making major personnel
     decisions, such as appointments and promotions, and (2) require
     that all severance agreements be consistent with the severance
     policy and not take effect until approved by the full Council;

  -- revised the severance policy (in a public session) to cap any
     severance payment at the equivalent of 1 year's compensation;

  -- established an executive committee composed of one Council
     member from each state to develop and oversee the implementation
     of all administrative, operational, and personnel policies; and

  -- began reviewing other Council personnel policies and procedures
     to determine if revisions need to be made. 

These steps appear appropriate to help ensure that the Council meets
its responsibility for overseeing business operations and that its
policies are not substantially out of line with federal agencies'
practices.  However, the Council's business policies remain largely
outside the reach of public oversight and therefore do not receive
the same review as those of other public agencies.  The act, in
describing the organization and operation of the Council, states that
the Council shall make available to the public a statement of its
procedures and practices.  Although the Council recently changed its
severance policy in a public session, under its current by-laws it
can still develop or modify other business policies without
considering the public's view or even informing the public of the
pending policy changes.  In contrast, the Administrative Procedure
Act requires federal agencies to publish their regulations and major
policies and provide opportunity for public input when they change
those policies.  For example, federal executive agencies publish
policies covering travel, severance pay, personnel, and the like, and
seek public comments on changes to those policies. 

Greater public access to the Council's business policies could be an
important way to help ensure that the Council members continue to
devote sufficient attention to the Council's business operations. 
This assurance is important because (1) rapidly changing conditions
in the utility industry and fish and wildlife planning continue to
dominate the Council's workload and (2) the Council members serve
only for a few years, meaning that the lessons learned from this
instance may be forgotten in a relatively short time. 

Providing greater public access to the Council's business policies
could be accomplished using mechanisms that the Council already has
in place for its power planning and fish and wildlife program.  For
example, the Council could identify in its existing publications,
such as its monthly newsletter, a listing of its policies and make it
clear that these policies are available for public review.  When
revising an existing policy or developing a new one, the Council
could describe the proposed revision in its newsletter, explain why
the revision or new policy is needed, and invite the public to
comment. 


   CONCLUSIONS
------------------------------------------------------------ Letter :5

As a publicly funded regional planning body, the Council derives its
effectiveness in part from its continued credibility.  This
credibility depends not only on the quality of its work in power and
fish and wildlife planning, but also on business practices that
demonstrate the sound use of public funds.  Greater public oversight
of the Council's business operations could help protect this
credibility. 


   RECOMMENDATION
------------------------------------------------------------ Letter :6

Given the amount of expected change and uncertainty in the Council's
main areas of focus--power and fish and wildlife--the potential
exists for the Council members' attention to be similarly shifted
away from administrative matters in the future.  Therefore, we
recommend that the Council chairman, working with all Council
members, develop a strategy to ensure that the public has (1) access
to existing policies and (2) the ability to review and comment on new
or revised policies. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :7

We provided a draft of this report to the Council and to the
governors of Idaho, Montana, Oregon, and Washington.  In commenting
on the report, the Council agreed with our findings, conclusions, and
recommendation and pledged to make further improvements to ensure
greater public access to the Council's business policies (see app. 
II).  The Governor of Montana also agreed with our report and stated
his belief that the Council can benefit from our recommendation (see
app.  III).  The governors of Idaho, Oregon, and Washington elected
not to provide comments on the report.  Both the Council and the
Governor of Montana noted that the report was balanced but believed
that its title could more accurately reflect its content.  As a
result, we modified the title to better reflect our message. 


---------------------------------------------------------- Letter :7.1

As arranged with your offices, unless you publicly announce its
contents earlier, we plan no further distribution of this report for
7 days from the date of this letter.  At that time, we will send
copies to the Secretary of Energy; the Chairman of the Northwest
Power Planning Council; and the governors of Idaho, Montana, Oregon,
and Washington.  We will make copies available to other interested
parties on request. 

Our review was performed from April through July 1996 in accordance
with generally accepted government auditing standards.  See appendix
I for a description of our scope and methodology. 

This work was performed under the direction of Bernice Steinhardt,
Associate Director for Energy, who may be reached at (202) 512-6868
if you or your staff have any questions about this report. 


Major contributors to this report were Carole J.  Blackwell, Gary R. 
Boss, Araceli C.  Contreras, William K.  Garber, Jackie A.  Goff,
Robin C.  Reid, Stan G.  Stenersen, and William R.  Swick. 

Victor S.  Rezendes
Director, Energy, Resources,
 and Science Issues


OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix I

Our objectives in this review were to address the following
questions: 

  -- Are the Council's program activities consistent with
     congressional direction? 

  -- Is the Council following sound business practices and exercising
     adequate oversight of business operations? 

To determine whether the Council's current program activities are
consistent with congressional direction, we reviewed the Pacific
Northwest Electric Power Planning and Conservation Act and other
congressional direction for the Council.  We also reviewed the
Council's annual budgets, reports to the Congress, annual work plans
for the Council departments involved in power planning and fish and
wildlife, as well as other Council files, for indications of the
Council's activities.  In addition, we reviewed amendments to the
fish and wildlife plan, the Council's 180-day report to the Congress,
a U.S.  Appeals Court decision, and other relevant documentation.  We
also interviewed Council staff responsible for fish and wildlife
planning. 

To determine whether the Council is following sound business
practices and exercising adequate oversight of its business
operations, we reviewed the audit reports and management letters from
the outside audit firm, reviewed the audit workpapers from the most
recent 3 years, and interviewed the partner in charge of the annual
audit.  In addition, we reviewed the Council's by-laws and policies
and procedures manuals and interviewed Council staff to determine
normal operating procedures.  We also tested the internal controls
for travel expense, payroll transaction, and procurement records for
fiscal years 1995 and 1996.  Collectively, these activities accounted
for about 75 percent of the Council's annual budget.  In addition, we
reviewed a compensation study prepared for the Council by an outside
firm, severance agreements for several employees who left the
Council, and the Council's practices for disposing of equipment. 

To determine the extent of oversight of Council activities, we
reviewed pertinent laws, by-laws, and policies and procedures.  We
also reviewed selected Council documents showing interaction with or
oversight by the Congress, federal and state agencies, and other
organizations and individuals interested in or affected by the
Council's activities.  In addition, we interviewed the Council's
senior management staff and obtained written responses to our
questions from the governors of Idaho, Montana, Oregon, and
Washington. 




(See figure in printed edition.)Appendix II
COMMENTS FROM THE NORTHWEST POWER
PLANNING COUNCIL
=========================================================== Appendix I



(See figure in printed edition.)




(See figure in printed edition.)Appendix III
COMMENTS FROM THE GOVERNOR OF
MONTANA
=========================================================== Appendix I


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